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Tata ‘s take over of Jaguar and landrover

March 29, 2008

 

 

 

 

 

 

    Halo EverybodySmile,         

        

                                

7 things needed to save Jaguar and landrover

March 26 2008
 
 
 
 

The news that the Indian conglomerate Tata is to buy Jaguar and Land Rover from Ford comes after months of speculation. However, now the deal has finally been done, the new owners need to make some things happen, and fast, or their billions will go to waste.

 

While Land Rover is in fairly good condition, much needs to be done at Jaguar. Fixing Jaguar and returning it to profitability is not impossible; the company has a good brand that could easily become stellar if nurtured properly. Its cars are reliable, a crucial basic starting point for any car firm today. If I had just spent £1bn on the company, here’s what I would do.

 

 

1. Build the F-Type
 
 
 
Jaguar F-Type concept (image © Jaguar)
 
Jaguar F-Type – click images to enlarge, more below

This one is quite easy, because the F-Type has already been designed in concept form back in 2000 and was even slated for production. Jaguar needs a halo car that will shout "we’re back in business, and we don’t intend coming second." Tata should get the plans together and modernise them, and get the product team cracking – and tell them they want a car in two years, not five. Audi has crowned its arrival in the luxury premier league by creating a 911-beating supercar – the R8 – that is wowing the world.

 

Audi even runs TV ads for it, even though it’s sold out in the UK for the next two years. Why? Because it says great things about the company for people who’ve only got 20-grand to spend, as well as those with 80…

 

2. Ditch the X-Type
 
 
 
 
Jaguar X-Type (image © Jaguar)
 
 
The ill-fated X-Type

 

Launched in 2001 to take on the BMW 3-Series and Audi A4, the disastrous X-Type is getting long in the tooth now and is starting to look like the odd-man-out among modern cars like the great XK and excellent new XF. It doesn’t sell that well anyway and is about to be dropped in the key US market. It’s hurting the brand and needs to be dumped full stop. At the same time at least one factory is going to have to go. Jaguar/Land Rover has factories at Halewood, Solihull and Castle Bromwich, and that is one factory too many. In a business where economies of scale are everything, this can’t continue.

 

Tata has made promises to unions around its existing factories continuing; I fear greatly these may be promises Tata can’t keep. Remember John Towers, the unions’ hero after ‘saving’ Rover and pledging continued mass-market production? His promises turned to ash when the entire company went belly-up five years later, defeated by economics. The focus must be to keep Jaguar/Land Rover alive – and not its constituent factories.

 

 

Nissan's Carlos Ghosn (image © PA Photos)
 
 
Nissan’s Carlos Ghosn
 

Ford never acted because it was scared of the labour-relations knock it would take on the rest of its large UK operations making engines and Transit vans. With less restrictions, Tata has to make it clear that drastic actions is needed to save the company, and sacrifices have to be made. If you announce this early and quickly, it will soften the blow, much like Carlos Ghosn’s quick action at Nissan was received with grudging respect even in a Japan where the words ‘redundancy’ and ‘closure’ are avoided at all costs .

 

 

 

3. Embrace diesel
 
 
 
Jaguar X-Type (image © Jaguar)
 
 
An auto-transmission X-Type diesel has only just arrived – years after the competition…

For years, Ford resisted diesel engines, listening too closely to Jaguar purists who insisted it didn’t fit the brand. This was unfortunate, and led the X-Type to be launched in thirsty petrol four-wheel-drive versions that the market didn’t want. There are two key things they need to do: the first is to install a diesel into the beautiful XK. When I asked a Jaguar PR lady about this once, she replied "now why would we want to do that?" as if I had suggested they produced all their cars in deep purple. Diesel is clearly still a dirty word in some Jaguar circles at a time when engine strategy at its deadly German rivals centres on making powerful yet economical diesels.

 

 

BMW 635d (image © BMW)
 
 
 
The mighty new BMW 635d

 

Look at the wonderful new BMW 635d, a key XK rival. It does 155mph and 0-60 in 6.3 seconds, yet will do 41mpg combined with just 183 g/km CO2. It drives sweetly too; no wonder BMW expect it to quickly take the majority of 6-Series sales. Jaguar needs to get a diesel into the XK pronto – preferably the sweet new 3.5 V8 diesel now seen on the Range Rover – and those who still think that diesel is a swear-word need to find an alternative line of work.

 

It has been widely mooted that the new company does a tie-up with Fiat; the boss of Tata, Ratan Tata, sits on the Fiat board, for example, and Tata distributes Fiats in India. The head of Fiat has talked positively about such an arrangement, especially as the Italian firm wishes to move most its Alfa Romeo-branded cars over to rear-wheel drive, like all Jaguars apart from the X-Type.

 

 

Jaguar XF (image © Jaguar)
 
 
 
New XF looks good, but needs a powerful diesel engine

 

 

The second thing they need to do is to fit a more powerful diesel to the new XF. The 2.7 V6 turbodiesel is a nice engine but with just 210bhp it doesn’t have enough poke to match the best German units. They need to make an engine of at least 260bhp that still gets less than 225 g/km, the level where road tax – and the London congestion charge – starts really complicating matters. The Germans can do it; so can Jaguar. If the engine engineers say it’s not possible, Tata must again tell them to find an alternative line of work. The future of the company is at stake.

 

 

It’s daft that the XF only offers one diesel engine while Audi and Mercedes-Benz offer three apiece, and BMW four.

Finally, there is another very good reason to go diesel: it is the main way to drag down CO2 emissions, the way cars are taxed in the UK and, crucially, the key determinate in threatened EU rules on taxation of car companies. Come 2012, car firms like Jaguar which have a fleet average above 130 g CO2/km may face swingeing fines of around £3,000 for every vehicle they make. Jaguar – and even more so, Land Rover – is going to have to get its green act together, and fast.

 

 

4. Install a car guy to run the place
 
 
 
 
Nick Scheele (image © PA Photos)
 
Former Jaguar boss Nick Scheele

 

 

Jaguar has lacked visionary leadership in the past few years, mostly being managed by professional Blue Oval salarymen – and women – on ‘here today, gone tomorrow’ assignments who never gained – or lost – much if the company succeeded or failed. Even the best regarded of Jaguar’s past bosses – Nick Scheele, who took the company to a brief period of profitability in the late ’90s – put in place various plans such as the X-Type and the conservative 2003 XJ that went awry. Tata needs to install a seasoned car guy (or gal) with a long and successful track-record and incentivise them to deliver.

 

Former Audi boss Martin Winterkorn (image © PA Photos)
 
 
Martin Winterkorn revved up Audi

 

Tata must establish key targets around sales and profitability and even enterprise value too (how much more/less the company is worth after x years, as established by an independent auditor) – and reward them handsomely if they are hit. When there, give the new boss free rein to clear out all the time servers who’ve been part of the past at Jaguar, and promote some existing talent. Any company that can make a car as good as the XK clearly has lots of potential locked within it. Tata should also aggressively headhunt people from successful companies like BMW/Mini, Bentley and VW/Audi.

 

5. Sort out the marketing
 
 
 
 
Jaguar's 'Gorgeous' ad campaign fell flat (image © Jaguar)
 
 
Jaguar’s ‘Gorgeous’ ad campaign fell flat

 

Jaguar’s ‘Gorgeous’ marketing campaign didn’t really work when applied to ungorgeous cars like the dreary X-Type and ugly S-Type. Get design working in close harmony with product management/marketing to start producing vehicles that can appeal to the modern design-savvy public. At the same time, reform public relations. One of the very clever things that Audi has done is to do deals with elite football clubs like Manchester United and Real Madrid, and as a result players of those clubs among others are constantly papped getting in and out of Audi cars delivering tons of free brand building advertising.

 

David Beckham at the wheel of an Audi Q7 (image © PA Photos)
 
 
 
David Beckham at the wheel of an Audi Q7

The look of the XK and XF is a good place to build on; Tata must make sure the Beckhams of the future are seen driving them. Ratan Tata said at this year’s Geneva Motor Show that he planned to "retain the image, touch
and feel" of both Land Rover and Jaguar. To be frank: noooooo! Both images need a sharp update; anything else will be re-arranging the deckchairs on the Titanic, continuing all of Ford’s mistakes.

 

Jaguar needs to lose its ‘old man’s car’ image as soon as possible, while for that matter Land Rover need to do the seemingly impossible and make the 4x4s it produces appear socially acceptable in these green-aware days. BMW has recently been following a "green can be fun" policy with its Efficient Dynamics programme that has – amazingly – given its sporty cars the best economy in their respective classes. Land Rover – as a maker of only SUVs – need to pursue a policy of "4x4s can be green", getting its vehicles’ economy and CO2 emissions to car-levels in short order.

 

 

6. Make them somewhere else
 
 
 
 
BMW X5 (image © BMW)
 
Not made in Germany: BMW X5

 

I can hear the groans already. However, we need to get real. Car making is a global business, and cars are made all over the place these days. One of China’s biggest car brands today is the American old-school name Buick, but today all are made in China. Those all-German 4x4s – the Mercedes-Benz ML-Class and BMW X5 – have in fact never ever been made in Germany, but always in America. That quintessentially Italian small car – the lovely new Fiat 500 – is in fact made in Poland.

 

Jaguar XK (image © Jaguar)
 
 
Jaguar XK: £60,000 in the UK, $70,000 in the US. At $2 to the pound it is very expensive to export to America

 

All those cars manage somehow to retain those national qualities with which they have positive associations and still get away with it, and Land Rover and Jaguar will be the same. Land Rovers made in India? Seems to make sense. Both Jaguar and Land Rover have been absolutely caned by the weak dollar; with its cars mostly costing pounds sterling and euros to make, the dollars they have received from selling in the US have been worth less and less. For example, Jaguar XK’s list UK price is £60,000. In the US, it’s $70,000; at the current $2 to the pound, that leaves just £35,000 to bring back to the UK to pay its staff and suppliers – ouch.

 

Jaguars made in the US – maybe under contract, where the dollar’s vascillations won’t hurt it? Why not? Maybe buy one of those many Chrysler factories that are being closed down. Or even one from Ford…

 

 

7. Work out what the XJ is for
 
 
 
 
Jaguar XJR (image © Jaguar)
 
 
Jaguar XJ: a good car, but the next one must be great

 

The current XJ is an excellent car but it has been hampered by a ‘same but bigger’ design informed – if rumour has it correctly – by talking at great length to elderly Americans about what they wanted from a big cat. Is the XJ for rich old men plus Gordon Brown to drive about in? Or is it for executives who are into middle age but none too happy about it? The latter is where some serious sales are to be had, in a territory currently dominated by the Audi A8 and BMW 7-Series. Mercedes may always have the ‘it must be a Merc’ market more or less to itself.

 

However, there is much more fluidity and less brand loyalty in the sportier end of the large executive market. Get a new car that looks great as well as different, use PR to make sure the right people are seen driving them, and combine with great marketing emphasising eternal Jaguar values of grace, space and pace – updated for the modern era of course. And position the car as an original, high-tec choice that will stand its owner out from the sheep in their 7-Series’ and A8s.

 

Some of the above will be painful and some will be a pleasure. What is clear is that Jaguar is drinking in the last chance saloon and action needs to be fast and decisive – and I for one will be delighted if the big cat survives its near death experience to roar proudly once again.

PS: don’t forget Land Rover
 
 
Range Rover Sport (image © Land Rover)
 
 
The hot-selling Range Rover Sport

I know Tata will be busy with Jaguar, but please let them not neglect Land Rover. It makes decent cars and is said to be profitable – it would hard not to be with big sellers like the Range Rover Sport – but such is the competitive nature of the international car market Land Rover cannot stand still. One thing driving Land Rover in recent years has been that the car-market winds have definitely been in its favour, with buyers flocking to 4x4s in many major markets including the UK.

Well, the winds have turned and political sentiment in many countries may see such vehicles taxed out of existence if they do not watch out, and as noted above (see ’embrace diesel’) the uneconomical bias of the Land Rover range may cause it immense regulatory and tax problems in the future.

Land Rover Discovery 3 (image © Land Rover)
 
 
Heavyweight champ: Land Rover Discovery 3

 

As one of the very few firms that only makes this type of car, this could be a major problem. And with that, these vehicles may become just as unfashionable as they once were de rigeur. Current Land Rovers are far too heavy; the Discovery 3 clocks in at an absurd 2,700kg – far more than key rivals such as the BMW X5 (2,000kg), Mercedes ML-Class (2,200kg) or even Hummer H3 (2,132kg). Weight equals thirst equals CO2 equals draconian taxation in the future and horrid depreciation.

Future Landies must be much much lighter, making greater use of composite alloys and aluminium. Yes I know aluminium is expensive right now – but hopefully it won’t be forever. BMW’s X5 3.0SD is an amazingly swift sports 4×4 that offers 286bhp but still does 34.4mpg combined and 216 g/km CO2. Land Rover’s Range Rover Sport TDV6 conversely only offers 190bhp, 28.2mpg and 265 g/km CO2. Not good.

Whether we like it not, Land Rover cannot get away with making such bulky machines in the future, and all that carbon offsetting won’t placate the critics. The company must also embrace hybrids; if Porsche can, then so can Land Rover. It could buy a system from Ford such as the one they use for the Explorer SUV in the US, or better still demand one as a leaving present.

 

JD Power 2007 US Dependability survey (image © JD Power)
 
Land Rover must improve its reliability.

 

The other thing you must do is sort out Land Rover’s quality. The chart on the right shows the results of the latest JD Power reliability survey of the US market – Land Rover’s biggest. The most reliable cars are Buicks and Lexuses, with 145 reported problems per 100 vehicles. The average is 216; the second worst is Suzuki with 324, and then a massive jump to Land Rover with 398.

This is a disgrace. You hear too many reports of Land Rover unreliability in the UK too, and any company that makes a habit of this will eventually face major problems in terms of warranty repair costs and reputational damage.

 

Range Rover Sport at the Shanghai Motor Show (image © PA Photos)
 
 
Range Rover Sport at Shanghai Motor Show

It is a measure of the power of the Land Rover brand that the company’s sales are currently at record levels, driven by surging demand from Russia, China and other booming developing markets. Land Rover will not prosper with this level of unreliability, and the first thing that Tata must do at Land Rover is to declare a war on it. And they are in a good position now to find out how. Why? Well, there is one company that was once a byword for appalling reliability both in the UK and the US. Since those days it has got its act together.

 

 

 

 

 

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